The fixed liabilities In economics, it is one of the concepts that is applied to qualify the different expenses incurred by any company in the development of its activity. In this way, its use is essential to be able to calculate the accounting. This way you can control whether the company is making profits or losses.
There are other concepts related to this that should not be confused, such as current or deferred liabilities, both within the expenses section.
In income we find some such as current, deferred or functional assets. Taking into account all these, the company will know if its economic operation is adequate or if it should make any changes.
To understand what fixed liabilities are, you must first have some notion of the general concept of liabilities..
Liabilities are what a company owes. These debts can be due to various circumstances and be of different types.
They can be fixed, variable, deferred and others. In general, according to International Accounting Standards, they are all those that are subject to a contractual obligation and that can be paid with the capital of the company.
They can be due to loans that are needed, to the expenses of buying material or to other reasons
Within the liabilities, the company must separate those that are fixed or those that are of other types. When making a balance sheet they are usually placed on the right side of the accounting document.
Fixed liabilities are all debts that the company acquires that do not have to be paid until at least one year later. These types of debts are supposed to be used for long-term investments..
They can also be used to finance some current expenses. For example, it is usual that with the money from a long-term loan you can pay some payroll or the expenses that the daily operation of the company entails..
As already explained, fixed liabilities are those maturing in more than one year. That is why they usually correspond to quite large expenses and that must be covered with the profits that are generated..
Among these expenses are mortgages to purchase homes or premises. These are usually paid in the long term and, whether for the family or business economy, it is a very important investment, so it is difficult to pay in full in cash.
They are economic amounts that the company must return on specified dates. The payment is guaranteed because the company puts real estate and other properties as collateral.
Payments that a company is obliged to make in a period exceeding one year. If not, it would be a current liability.
Fixed liabilities include other loans that are requested from banks, such as credits or bonds. Any significant amount usually goes on credit, so the terms to pay it is several years.
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